Mortgage rates today, January 21, 2019, plus lock recommendations

What’s driving current mortgage rates?

Average mortgage rates today are unchanged from Friday’s because today is Martin Luther King Day and financial markets are closed. Your own lender may be open and may be locking interest rates, but you’ll have to contact it to see if that’s the case.

Financial data affecting today’s mortgage rates

Markets are closed today. These are Friday’s closing numbers, but they did get worse for mortgage rates than the opening data.

Major stock indexes closed higher (bad for mortgage rates)

Gold prices fell $1 to $1,280 an ounce. (This is bad for mortgage rates. In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower)

The yield on ten-year Treasuries rose 1 basis point (1/100th of 1 percent) to 2.78 percent. That’s bad news for borrowers because mortgage rates tend to follow Treasuries, and this is the lowest reading in months

CNNMoney’s Fear & Greed Index moved up 2 points to a neutral 51 (out of a possible 100). The upward direction of movement is bad for rates. “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite.

Rate lock recommendation

Rates appear to be static, and with the government shutdown, investors are wary. Still, financial data point to rising rates in the near future.

In a rising rate environment, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer your lock, the higher your upfront costs. If you are weeks away from closing on your mortgage, that’s something to consider. On the flip side, if a higher rate would wipe out your mortgage approval, you’ll probably want to lock in even if it costs more.

If you’re still floating, stay in close contact with your lender, and keep an eye on markets. I recommend:

This week

This week is light on economic releases, and mortgage rates will likely move based on political happenings, such as the ongoing government shutdown, a trade war with China, and negotiations with Congress over the federal budget and the proposed border wall.

Friday: Durable Good Orders and New Home Sales (but only if not delayed by the government shutdown)

What causes rates to rise and fall?

Mortgage interest rates depend on a great deal on the expectations of investors. Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.

For example, suppose that two years ago, you bought a $1,000 bond paying five percent interest ($50) each year. (This is called its “coupon rate.”) That’s a pretty good rate today, so lots of investors want to buy it from you. You sell your $1,000 bond for $1,200.

When rates fall

The buyer gets the same $50 a year in interest that you were getting. However, because he paid more for the bond, his interest rate is now five percent.

Your interest rate: $50 annual interest / $1,000 = 5.0%

Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2 percent. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.

When rates rise

However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.

Imagine that you have your $1,000 bond, but you can’t sell it for $1,000 because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:

$50 annual interest / $700 = 7.1%

The buyer’s interest rate is now slightly more than seven percent. Interest rates and yields are not mysterious. You calculate them with simple math.

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.